Jan. 21, 2013 - 07:03AM
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Federal agencies are girding for mass furloughs and other cutbacks as across-the-board budget reductions loom in barely a month.

“Hundreds of thousands” of employees face unpaid time off if those cuts take effect, Jeff Zients, acting chief of the Office of Management and Budget, wrote in a Jan. 14 memo.

Hiring freezes, laying off temporary workers and offering buyouts and early retirements are also on the table, Zients wrote. At the Defense Department, with a civilian workforce of almost 800,000, the Army, Navy and Air Force all announced hiring freezes and warned that furloughs were possible. Navy commanders, for example, should assume that one-day-per-week furloughs will begin the week of April 16 and continue through the end of the fiscal year in September, Rear Admiral J.P. Mulloy, deputy assistant secretary for budget, said in a memo.

If furloughs occur, Mulloy added, they “will be a governmentwide effort with limited exceptions.” Further guidance will come from the White House, he said. OMB officials did not respond to requests for comment late last week.

The Defense Logistics Agency, with a workforce of more than 25,000, notified its union last week that furloughs of up to 22 days for virtually all civilian staff may be needed between April and the end of the fiscal year. The Army and Air Force also aren’t ruling out the possibility of large furloughs.

The Army “must act now to reduce our expenditure rate and mitigate budget execution in order to avoid even more serious future fiscal shortfalls,” Army Secretary John McHugh and Chief of Staff Gen. Ray Odierno wrote in a joint memo to Army commanders dated Jan. 16. Besides the civilian hiring freeze, commanders should terminate temporary employees “consistent with mission requirements” and review contracts and studies for possible savings.

Participation in conferences will be “significantly” curtailed and all restoration and modernization projects halted, although exceptions are possible, subject to specifications.

The burst of activity came less than a week after Deputy Defense Secretary Ashton Carter told DoD leaders Jan. 10 to plan for the possibility of a yearlong continuing resolution that would generally leave 2013 spending frozen at last year’s levels, as well as for across-the-board budget cuts set to take effect at the beginning of March assuming that Congress and the Obama administration don’t strike a deal to head them off. The cuts, formally known as sequestration, would take about 9 percent out of most Defense Department accounts by the end of the fiscal year in September.

Part of the looming fiscal crisis appears likely to be put off, at least until late May.

Rep. Eric Cantor, R-Va., said Jan. 18 that the House this week will pass a three-month debt ceiling extension, so Congress can have more time to negotiate budget cuts.

Civilian agencies would also would be hard-hit by budget cuts, although planning outside of the Defense Department appeared to be less advanced.

Furloughs will vary

Agencies whose budgets are primarily personnel costs — such as the National Park Service — will probably have to furlough most of their staffs for up to a month this year, said Henry Romero, a former Office of Personnel Management executive.

But other agencies with more diversified budgets — for example, components of the Department of Homeland Security — may be able to shield their workforces a little more, said Romero, now a consultant at Federal Management Partners. They may be able to cut back or defer spending on contracts, equipment, maintenance or other expenses besides personnel and avoid lengthy or widespread furloughs, he said.

Federal chief financial officers are likely looking for places where they can delay payments or stop buying certain services for a few months, he said.

“Some agencies may have difficulty finding other places to cut,” Romero said. “But some agencies have more flexibility than others.”

Romero said agencies are more likely to offer early retirements than buyouts in response to sequestration, which will require them to cut their budgets quickly. Buyouts are a good tool for agencies looking to reduce their spending in the long term, he said. But because buyouts include one-time payments of up to $25,000, incurring those expenses wouldn’t be a good strategy for an agency under pressure to cut millions of dollars in a few months.

Early retirements, on the other hand, contain no such payments and may be a better option, Romero said.

But agencies should keep their long-term staffing needs in mind when offering early outs or buyouts, Romero said. Managers shouldn’t offer buyouts or early outs to key employees in mission-critical occupations.

“The risk is, by letting someone retire early, you’re admitting that you could afford to do the work without your current level of staffing,” Romero said. “Two years from now, you can’t go back and say, ‘I need to hire three more of the people I just let go.’ “

But even if Congress and President Obama strike a deal to avert sequestration, steep budget cuts are certain to hit agencies anyway. That means furloughs and hiring freezes are virtually certain to take place, no matter what happens.

“If and when there’s a settlement, it’s not going to be all of a sudden, the spigots open and money flows again,” Romero said. “It’s going to be tight for the government for the next several years.”

Sequestration is mandated by the 2011 Budget Control Act unless Congress and the Obama administration agree on another route. The cuts had originally been set to start at the beginning of this month, but a last-minute deal postponed them for two months. At the Partnership for Public Service, John Palguta was optimistic that policymakers will find a way to spare agencies from severe cuts.

But while federal employees shouldn’t be overly worried about large-scale furloughs, they should set aside some rainy-day money and think twice about major purchases, suggested Palguta, the partnership’s vice president for policy.

Dire news for temps

The outlook could be more dire for temporary workers. As of October, there were more than 156,000 temps across government, according to OPM. They lack the civil service job protections afforded career employees.

The administration’s cost-cutting strategy also triggered accusations of favoritism from the largest federal employee union.

In comparison with the potential impact on the federal workforce, services contractors “emerge relatively unscathed,” J. David Cox, president of the American Federation of Government Employees, said in a letter last week to Danny Werfel, OMB’s controller and acting deputy director for management.

“On what grounds can such disparate treatment be justified?” Cox wrote. “To balance the hiring freeze, why isn’t OMB endorsing freezes on new service contracts, exercises of contract options and approvals of contract modifications?”

An OMB spokeswoman did not respond to a request for comment. In an interview, the head of a service contractor trade group said federal contract spending has fallen by billions of dollars in the last year, with a resulting loss of thousands of jobs.

“The key point is what skills does the government most need to best achieve its mission,” said Stan Soloway, president of the Professional Services Council. Arbitrarily targeting federal workers or contractors, he said, is “counterproductive.”